Comparison Of Credit Risk In China's Different Regions

Credits are the cornerstone of modern market economy, and evaluation of credit risk is to determine the status of debtor's performance. It maintains the operational orders in the markets and improves the economic activity for the incomplete information and asymmetric information effectively. In 1970's, foreign scholars had begun to research the evaluation of credits risk, which developed a series of measurement model and the theories were widely used in economic activities. But while China's credits risk evaluation, no matter on theoretical or practical application, were obviously backward. With China's market economic system continuously improved and the economic transformation from extensive expansion at high speed to'New Normal'development, credit has gradually become the basic condition of economic subject's survival and development and credit risk evaluation starts getting more and more attention from the whole society.Although China has vast territory with the generally same institution and culture, the distribution of economic element and the economic development level have a huge gap, and the behavior habits have significant differences. The current regional differences research tends to focus on economic development, structure, efficiency, and resource distribution, but none of above is about regional credits. In regional angle, this paper takes the example of foreign advanced models in credit risk evaluation to explore China's regional credits risk. And it could reveal the regional differences of credit risk.Firstly, this paper utilizes the KMV model, which is based on the sort of the domestic and foreign mainstream credit risk evaluation model, by comparing the advantages and disadvantages of the traditional and modern ones, finally to make the appropriate choice. Secondly, it could make use of the different regional listed corporations'data, with methods of empirical analysis, to evaluate the different regional credits risk, and settle the study on this foundation. Finally, principal component regression would be found at the last analysis to explore the reasons that caused the different regional credits risk. The analysis results show that: (1) Credit risk in different regions of China is obviously different, the developed areas almost in coastal have lower credit risk, the risk in middle and west areas is much higher. (2) With the trends of macro economic pressure increasing, the overall credit risk of China is rising these years. (3) By principal component regression analysis, there are the unemployment rate, industrial structure, and opening level, three out of all factors, mainly explain the regional credit risk, respectively are 22.43%,21.8% and 21.7%.